Tenants looking for a loan generally have less choice available to them than homeowners. If you're a homeowner, you could go for a secured loan, drawing on some of the equity in your property. You could also opt for an unsecured loan, where the lender does not require you to "secure" the loan against the value of your home so that they may liquidate the asset in the event of a default.
If you rent your home, you can not take out a secured loan as you do not own it and therefore have no collateral to secure the loan against. Tenants can instead opt to take out an unsecured loan or "tenant loan".
There are sometimes limitations to unsecured loans however. Because there is no security for the lender, there is a higher risk as far as they are concerned. For this reason, the level of the advance (the amount that can be borrowed) is often limited to somewhere between £ 15,000 and £ 25,000, dependent on the individual lender. Secured loans or "homeowner loans" may go up to £ 100,000 or even £ 250,000 with certain lenders. Of course, just because you want to borrow this much does not mean that it would always be easy. There are conditions that need to be met, but we'll talk more about that in some of our other secured loan articles.
What About My Credit Rating?
Tenant loans may also require a reasonably good credit rating to attract a "low interest rate". Again, risk is an important factor for a lender and if they feel that your credit history does not demonstrate that they are very likely to have all of their money repaid on time (including interest), then they may walk away or at the very least , increase the rate of interest to be charged on the unsecured loan or even reduce the amount that they are prepared to advance.
That said, the days where a tenant was not able to get an unsecured loan due to a poor credit rating are thankfully very behind us. Now, more and more tenants are able to borrow the money that they need to enjoy the finer things in life, rather than be excluded as was the case until comparatively recently.
Tenants can now borrow money for: –
a new car, motorbike or van
a fabulous, far off holiday
a wonderful wedding to remember, with all the trimmings, or even
to consolidate some existing credit and make things easier to manage I'm sure that you can think of many more reasons to borrow money? However, while some may say that it has never been easier to take out an unsecured tenant loan, always read the small print and make sure that you are able to make the monthly repayments. You could always take out the additional insurance however, that your lender may offer to protect you in case of accident, sickness or redundancy. Many people have benefited from their insurance, not just in making a claim under these circumstances, but for the peace of mind that the loan insurance partnerships.
Whatever your purpose and whatever your circumstances, an unsecured tenant loan may be just what you're looking for.